Let’s not kill off nascent oil industry

by David Gleason,
July 16 2013, 05:49

David Gleason

Let’s not kill off nascent oil industry

DOES the seabed off South Africa’s long coastline hold rich oil and gas fields? Conventional wisdom is that it doesn’t, except for the small pocket of gas off Mossel Bay we have been utilising for 25 years, and untapped fields off the west coast.

But new geological thinking suggests a possibility that the west coast gas fields may be the cream on top of much larger gas resources and, perhaps, even oil.

Democratic Alliance minerals spokesman James Lorimer, who was lashing Mineral Resources Minister Susan Shabangu for her department’s budget in May, said then that the big oil players such as Shell, Total, ExxonMobil and Anadarko (US independent), all of which have been allocated oil exploration blocks off the South African coastline, are hoping for oil and expecting large reserves of gas.

If this were to come true it would be a game-changer for the economy. But if it does come to pass it will have to surmount another obstacle, one that may defeat it before it is even born. A bill is in the pipeline to amend the Mining and Petroleum Resources Act in a manner that seems likely to persuade the oil and gas drillers to go elsewhere. This is an attitude and approach with which this country has become remarkably proficient — where did all those junior mining companies go, those who had pitched their tents here in large numbers? They fled, their early enthusiasm leached away by regulation, bureaucracy and corruption.

Legal sources tell me the bill not only fails to achieve the laudable objectives intended, but actually undermines the existing legislation. It creates a mish-mash of regulatory uncertainty. Investors wondering about putting their money into mining or oil and gas exploration in South Africa will simply move elsewhere.

The bill guarantees the state an interest in all new exploration and production rights. This is a free carry, meaning the state doesn’t have to make any financial contribution. And it gives itself the right to expand that stake if the minister feels it is appropriate. But the proposed legislation is vague in this area — what share of annual profits will the state want for itself? Will there be a standard formula or will it be done on a case-by-case basis?

The state also has the right to appoint two directors to the management board. That’s going to be a problem because most production rights are held by unincorporated joint ventures. Then there’s the black economic empowerment (BEE) element. The bill says the Mining Charter will apply to the upstream petroleum and gas industry. But the industry is already regulated by the petroleum and liquid fuels industry charter. That requires BEE participation of 9%. The Mining Charter requires BEE participation of 26%. You can imagine what that will do to the economics.

So which charter will prevail? Here is another legislative muddle that immediately induces uncertainty for investors. When the bill was released for comment late last year, Lorimer records "a storm of concern from mining industry players and analysts who predicted huge problems in the mining sector". The noise was such that it drowned out the worries of the oil and gas drillers, now clearly audible.

What this bill does is outline starkly the grim circumstances of the mining industry and a new industry that might, just might, change South Africa for ever. There can no longer be much doubt that the mining sector has fallen foul of intense crony capitalism. If the promise of a new oil and gas industry is to be realised, however, it will need tending with the utmost care. Greed, managerial incompetence, and the long lines of the favoured elite may combine to pull tight the umbilical cord around the throat of this unborn industry.

If that happens, our sorrow and anger should know no limits.

...

‘Blackmail bid’ at SARS alarms

MY FIRST question when I learnt of former South African Revenue Service (SARS) commissioner Oupa Magashula’s intimate luncheon with Timothy Marimuthu was, what on earth was he doing rubbing shoulders with a convicted drug dealer? It reminded me rather too closely of former police commissioner Jackie Selebi’s long-standing friendship with another druglord, Glenn Agliotti.

On the sole occasion that I met Magashula, over breakfast after I had complained endlessly of a variety of matters brought to me by readers, he was solicitous, charming and attentive. Accompanied by three of his senior executives, he didn’t give much away.

But what is troubling is the legacy Magashula leaves behind. Yes, he fell on his sword after improperly offering a young woman a job in SARS on the phone, but he really had no option. There was nothing manly or principled about his resignation. A comprehensive investigation led by former Constitutional Court judge Zak Yacoob found that Magashula had put SARS’s reputation and credibility at risk.

What is really of concern is the observation of the investigators that they were unable to determine how many people were involved in "the attempt to blackmail the commissioner". Magashula clearly has a long-standing relationship with a man involved in areas of society with which the commissioner of revenue should have no connection.

According to The Witness, Marimuthu was appointed a crime intelligence agent at R50,000 a month by suspended crime intelligence chief Lt-Gen Richard Mdluli, and Marimuthu’s family members were also appointed to senior positions.

This after Marimuthu had been convicted of importing Mandrax tablets from Mozambique and sentenced to three years in jail in 1997. According to Media24, he never served a single night, having arranged for his sentence to be "illegally converted to correctional supervision".

It is rumoured that a culture of jobs for pals has become de rigueur in SARS. If true, that is especially worrying. I don’t see how the commissioner’s disgrace can be allowed to end here. The apparent attempt at blackmail and the stories now surfacing about goings-on in SARS need to be investigated and exposed.

In this article

DOES the seabed off South Africa’s long coastline hold rich oil and gas fields? Conventional wisdom is that it doesn’t, except for the small pocket of gas off Mossel Bay we have been utilising for 25 years, and untapped fields off the west coast.

But new geological thinking suggests a possibility that the west coast gas fields may be the cream on top of much larger gas resources and, perhaps, even oil.

Democratic Alliance minerals spokesman James Lorimer, who was lashing Mineral Resources Minister Susan Shabangu for her department’s budget in May, said then that the big oil players such as Shell, Total, ExxonMobil and Anadarko (US independent), all of which have been allocated oil exploration blocks off the South African coastline, are hoping for oil and expecting large reserves of gas.

If this were to come true it would be a game-changer for the economy. But if it does come to pass it will have to surmount another obstacle, one that may defeat it before it is even born. A bill is in the pipeline to amend the Mining and Petroleum Resources Act in a manner that seems likely to persuade the oil and gas drillers to go elsewhere. This is an attitude and approach with which this country has become remarkably proficient — where did all those junior mining companies go, those who had pitched their tents here in large numbers? They fled, their early enthusiasm leached away by regulation, bureaucracy and corruption.

Legal sources tell me the bill not only fails to achieve the laudable objectives intended, but actually undermines the existing legislation. It creates a mish-mash of regulatory uncertainty. Investors wondering about putting their money into mining or oil and gas exploration in South Africa will simply move elsewhere.

The bill guarantees the state an interest in all new exploration and production rights. This is a free carry, meaning the state doesn’t have to make any financial contribution. And it gives itself the right to expand that stake if the minister feels it is appropriate. But the proposed legislation is vague in this area — what share of annual profits will the state want for itself? Will there be a standard formula or will it be done on a case-by-case basis?

The state also has the right to appoint two directors to the management board. That’s going to be a problem because most production rights are held by unincorporated joint ventures. Then there’s the black economic empowerment (BEE) element. The bill says the Mining Charter will apply to the upstream petroleum and gas industry. But the industry is already regulated by the petroleum and liquid fuels industry charter. That requires BEE participation of 9%. The Mining Charter requires BEE participation of 26%. You can imagine what that will do to the economics.

So which charter will prevail? Here is another legislative muddle that immediately induces uncertainty for investors. When the bill was released for comment late last year, Lorimer records "a storm of concern from mining industry players and analysts who predicted huge problems in the mining sector". The noise was such that it drowned out the worries of the oil and gas drillers, now clearly audible.

What this bill does is outline starkly the grim circumstances of the mining industry and a new industry that might, just might, change South Africa for ever. There can no longer be much doubt that the mining sector has fallen foul of intense crony capitalism. If the promise of a new oil and gas industry is to be realised, however, it will need tending with the utmost care. Greed, managerial incompetence, and the long lines of the favoured elite may combine to pull tight the umbilical cord around the throat of this unborn industry.

If that happens, our sorrow and anger should know no limits.

...

‘Blackmail bid’ at SARS alarms

MY FIRST question when I learnt of former South African Revenue Service (SARS) commissioner Oupa Magashula’s intimate luncheon with Timothy Marimuthu was, what on earth was he doing rubbing shoulders with a convicted drug dealer? It reminded me rather too closely of former police commissioner Jackie Selebi’s long-standing friendship with another druglord, Glenn Agliotti.

On the sole occasion that I met Magashula, over breakfast after I had complained endlessly of a variety of matters brought to me by readers, he was solicitous, charming and attentive. Accompanied by three of his senior executives, he didn’t give much away.

But what is troubling is the legacy Magashula leaves behind. Yes, he fell on his sword after improperly offering a young woman a job in SARS on the phone, but he really had no option. There was nothing manly or principled about his resignation. A comprehensive investigation led by former Constitutional Court judge Zak Yacoob found that Magashula had put SARS’s reputation and credibility at risk.

What is really of concern is the observation of the investigators that they were unable to determine how many people were involved in "the attempt to blackmail the commissioner". Magashula clearly has a long-standing relationship with a man involved in areas of society with which the commissioner of revenue should have no connection.

According to The Witness, Marimuthu was appointed a crime intelligence agent at R50,000 a month by suspended crime intelligence chief Lt-Gen Richard Mdluli, and Marimuthu’s family members were also appointed to senior positions.

This after Marimuthu had been convicted of importing Mandrax tablets from Mozambique and sentenced to three years in jail in 1997. According to Media24, he never served a single night, having arranged for his sentence to be "illegally converted to correctional supervision".

It is rumoured that a culture of jobs for pals has become de rigueur in SARS. If true, that is especially worrying. I don’t see how the commissioner’s disgrace can be allowed to end here. The apparent attempt at blackmail and the stories now surfacing about goings-on in SARS need to be investigated and exposed.

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